A recent case highlights the importance of documentation, along with the use of coverage checklists, to protect the agent. According to the plaintiff’s allegations (here, here), the plaintiff relied on the agent for advice, and the agent did not recommend adequate coverage. As a result of a fire loss, the plaintiff sustained approximately $1.0 million in uncovered costs. One key point was the lack documentation regarding the use of a checklist to ensure that full coverage was offered and either purchased or rejected. Another was the existence of a special relationship between the agent and the client.
[Plaintiff] frequently relied upon [defendant’s] recommendations because he did not “know anything about insurance,” he trusted her judgment and insurance experience, and he appreciated her attention to detail and good service….
The general duty of care does not include an affirmative obligation to give advice regardless of the availability or sufficiency of coverage. However, the existence of a “special relationship” between the insurance agent and the client may impose upon an insurance agent an affirmative duty to provide advice regardless of the availability or sufficiency of insurance coverage.
Good risk management procedures, particularly documenting a thorough process, can provide protection from claims, and reduce an agency’s E&O insurance premiums.
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